Financial Analysis Of Boral Limited And Adelaide Brighton Limited

Owners’ Equity

Boral Limited produces materials and products related to construction and related to buildings in Australia. The Boral limited is listed in Australian Stock market and the ASX code is ASX: BLD (AX, 2018). The core drive of the company is to produces and sells supreme and finest eminence of products and materials across globe. It sells the materials and products in Middle East, Asia, Australia and North America (Boral Limited, 2018). The company encourages safe and friendly working environment for the employees. Also analyse that the company has employed around 11499 people which includes 18% of women workforce. The key people are Mike Kane is CEO whereas Dr Brian Clark is the chairman. The foremost agenda of the company is to serve better value to the owners of the company.

Adelaide Brighton Limited is also a producer of construction materials. It mainly operates in Australia. It is listed in Australian Stock market and the ASX code is ASX: ABC (ASX, 2018). The core business activities of a company are to produce, sells, imports distribute concrete, clinker, construction, lime and cement. Further the company emboldens safe, morals and welcoming working atmosphere for the employees. Also analyse that the company has employed around 1600 people in Australia. Company’s main aim is to maximise the shareholders’ value. Further in order to meet the customer’s satisfaction, company offer turnkey results in all the business areas. The chief executive officer is Martin Brydon (Adelaide Brighton limited; 2017, 2016).

In this task both entities “Boral Limited” and “Adelaide Brighton limited” are taken into account. This report covers Complete understanding of each item of equity and cash flow items. In addition to this, comparative analysis of debt and equity portion, cash flow statement comprising three types of cash flows (operating activities, investing activities and financing activities) and other comprehensive income statement for three financial years that is 2017, 2016 and 2015 are computed. Moreover, effective tax rate of both companies is computed with the help of given tax expense in financial statements. Deferred tax assets/liabilities are also recorded. Also cash tax rate is computed along with cash tax amount. At last, this task is ended up with conclusions and references.

1. Items of Equity:

Adelaide Brighton limited:

• Adelaide Limited paid dividends for $ 156 million in financial year 2017 whereas in 2016 the dividends paid was $ 178.5 million. In other words, the dividend was decreased by 12.60%.
• Profit for the period was included in equity calculation. Thus, as per the annual report, net profit reported by the company is $ 182.1 million in 2017 whereas in 2016 net profit was reported $ 186.2 million which means the profit has declined by 2.2% because of increment in administration costs, cost of sales and freight and distribution costs (Adelaide Brighton limited, 2017, 2016).
• Other comprehensive income is also a part of statement of changes in equity. The Adelaide limited has reported $ 183.8 million in FY 2017 whereas in FY 2016 the same was reported with an amount $ 187.4 million. The decrement is due to less net profit in 2017 as compared to 2016 (Adelaide Brighton limited, 2017, 2016).

Boral Limited:

• According to the annual report 2017, it was observed that Boral limited had recognized $ 296.9 million as net profit whereas in financial year 2016, net profit was recognized $ 256 million. The reason for such increment in net profit in 2017 was due to increase in sales revenue by 7.92% in comparison to 2016.
• Taken into consideration total comprehensive income for the period 2017 and 2016 it was observed that in 2017 the same was reported with $ 174.3 million whereas in 2016 it was reported $ 251.7 million. This was resulted the decrement by 44.40% from 2016. The main reason was due to negative amount of translation of net assets of overseas entities (Boral Limited, 2017; 2016).
• The dividend paid is included in the statement of changes in equity. From the annual report, it is observed that dividend paid by the company in 2017 was $ 226.2 million whereas in 2016 dividend paid was $ 154.2 million. The reason was due to increment in net profit recognized by the company.

1. Comparative Analysis:

Adelaide Brighton Limited
Particulars	2017 ($m)	2016 ($m)	$ change	% change
LIABILITIES
Current Liabilities
Trade and other payables	145.8	117	28.8	25%
Borrowings	0.3	0.4	-0.1	-25%
current tax liabilities	9.8	15.4	-5.6	-36%
Provisions	33.8	31.9	1.9	6%
Other liabilities	15.1	3.3	11.8	358%
Total current liabilities	204.8	168	36.8	22%
Non-current liabilities
Borrowings	428.9	309.6	119.3	39%
Deferred tax liabilities	86	89.9	-3.9	-4%
Provisions	45	39	6	15%
Other non-current liabilities	0.1	0.1	0	0%
Total non-current liabilities	560	438.6	121.4	28%
Total liabilities	764.8	606.6	158.2	26%
EQUITY
Share Capital	733.1	731.4	1.7	0%
Reserves	1.9	2.9	-1	-34%
Retained Earnings	510.6	483.3	27.3	6%
Total Equity	1245.6	1217.6	28	2%

(Adelaide Brighton Limited, 2017; 2016).

Boral Limited
Particulars	2017 ($m)	2016 ($m)	$ change	% change
LIABILITIES
Current Liabilities
Trade creditors	812.4	607.9	204.5	34%
Loans and borrowings	407.4	352.4	55	16%
Financial liabilities	15.4	7.8	7.6	97%
current tax liabilities	64.1	36.6	27.5	75%
Employee benefit liabilities	115.5	118.8	-3.3	-3%
Provisions	53.5	58.2	-4.7	-8%
Total current liabilities	1468.3	1181.7	286.6	24%
Non-current liabilities
Loans and borrowings	2163.7	992.8	1170.9	118%
Financial liabilities	10.9	18.6	-7.7	-41%
Employee benefit liabilities	44.4	11.3	33.1	293%
Provisions	157.5	59	98.5	167%
Other liabilities	28.3	30.8	-2.5	-8%
Total non-current liabilities	2404.8	1112.5	1292.3	116%
Total liabilities	3873.1	2294.2	1578.9	69%
EQUITY
Issued capital	4265.1	2246.2	2018.9	90%
Reserves	19.3	162	-142.7	-88%
Retained Earnings	1156.1	1098.1	58	5%
Total Equity	5440.5	3506.3	1934.2	55%

(Boral Limited, 2017; 2016).

• Items of Cash flow statement:

1. Cash flow from operating activities:

Adelaide Brighton Limited:

• Receipts from customers and payments to suppliers and employees are increased in 2017 from 2016. In other words, payments to suppliers and employees are increased by 11.32% which is more than receipts from customers which is 8.1% and there are chances of decrement of net profit in a current FY (Adelaide Brighton limited, 2017; 2016).
• Interest paid is covered under cash flows from operating activities because it is considered as regular in nature. In this case, FY 2017 has reported $ 13 million whereas in 2016 it was recognised as $ 12.1 million (ASX, 2018).
• Cash flows from operating activities are also covered taxes paid for income.  he company has paid $ 81.3 million in 2017 whereas $ 67.2 million in 2016.

As a result, cash flow from operating activities are declined in 2017 from 2016 by 9.74%.

Boral Limited:

• This company has reported net cash receipts from customers is $ 534.1 million in 2017 which shows a decrement from last year by 5.67%. This is due to less receipts from customers in current FY by $ 52.4 million.
• Both dividend and interest received by the company are more in 2017 which is a positive sign for the company (Boral Limited; 2017; 2016).
• Restructure, acquisition and integration costs paid by the company is $ 116.9 million in 2017 whereas 2016 company has reported $34.5 million. The reason is that company has purchased controlled entities and businesses (ASX, 2018).

    As a result, cash flow from operating activities are declined in 2017 from 2016 by 13.44%.

1. Cash flow from investing activities:

Adelaide Brighton Limited:

• In this category of cash flow, payments or proceeds related to fixed assets, intangible assets and investments are recorded. Hence, the company had reported payments for property, plant, equipment and intangibles and payments for acquisition of businesses is $ 89.1 million and $ 80.2 million in 2017 whereas in 2016 it was reported $ 86.5 million.
• Proceeds from sale of property, plant, equipment is only $ 17.7 million whereas in 2016 it was reported $ 23.2 million.

As a result, the company has reported Net cash outflow from investing activities is $ 154.1 million in 2017 which means the same was increased by $ 90 million.

Boral Limited:

• In this category of cash flow, payments or proceeds related to fixed assets, intangible assets and investments are recorded. Hence, the company had reported payments for property, plant, equipment and intangibles and is $ 340.1 million in 2017. Also given that the company has purchased controlled entities and businesses for $ 3636.5 million in 2017.
• The proceeds from disposal of purchased controlled entities and businesses for $ 122.5 million in 2017. Hence the result would be cash outflow from investing activities.

As a result, net cash used in investing activities is $ 3731.5 million which has increased by $ 3471.8 million from past year.

1. Cash flow from financing activities:

Adelaide Brighton Limited:

• Proceeds from issue of shares are included in cash flow from financing activities where the company has reported $ 3.5 million.
• The company has drawn down borrowings of $ 118.5million whereas in last year company has repaid borrowings of $ 21 million.
• Dividends paid are recognised in cash from financing activities. In this case, $ 156 million and $ 178.5 million was reported in FY 2017 and 2016 respectively. This might due to less issue of shares in 2017.

As a result, net cash outflow from financing activities is $ 34 million which has decreased by $ 161.5 million from past year (Adelaide Brighton Limited, 2017; 2016).

Cash Flow Statement

Boral Limited

• Dividends paid are recognised in cash from financing activities. In this case, $ 226.2 million and $ 154.2 million was reported in FY 2017 and 2016 respectively. This might due to more issue of shares in 2017.
• Capital raising are included in cash flow from financing activities where the company has reported $ 2018.9 million in 2017 (Boral limited, 2017; 2016).
• Proceeds from borrowings are increased by 1801.4 million in 2017 from 2016 which is tremendous.

As a result, net cash provided by financing activities is $ 3107.5million which has increased by $ 2833.6 million from past year.

iv and v. Comparative analysis:

Adelaide Brighton limited
Particulars	2017 ($’m)	2016 ($’m)	2017 (%)	2015 ($’m)	2016 (%)
cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)	1,661.30	1,536.10	8.15%	1,545.80	-0.63%
Payments to suppliers and employees (inclusive of goods and services tax)	-1,379.40	-1,239.10	11.32%	-1,272.10	-2.59%
Joint venture distributions received	26.40	18.60	41.94%	16.20	14.81%
Interest received	1.60	1.50	6.67%	1.70	-11.76%
Interest paid	-13.00	-12.10	7.44%	-13.00	-6.92%
Other income	8.60	6.20	38.71%	5.60	10.71%
Income taxes paid	-81.30	-67.20	20.98%	-58.50	14.87%
Income taxes refunded	0.00	4.40	-100.00%	4.20	4.76%
Net cash inflow from operating activities	224.20	248.40	-9.74%	229.90	8.05%
Cash flows from investing activities
Payments for property, plant, equipment and intangibles	-89.10	-86.50	3.01%	-74.30	16.42%
Payments for acquisition of businesses, net of cash acquired	-80.20	0.00	#DIV/0!	-6.50	-100.00%
Proceeds from sale of property, plant and equipment	17.70	23.20	-23.71%	50.80	-54.33%
Loans to joint venture entities	-3.10	-2.00	55.00%	-0.90	122.22%
Repayment of loans from other parties	0.60	0.60	0.00%	0.60	0.00%
Net cash outflow from investing activities	-154.10	-64.70	138.18%	-30.30	113.53%
Cash flows from financing activities
Proceeds from issue of shares	3.50	4.00	-12.50%	2.80	42.86%
Draw down / (repayment) of borrowings	118.50	-21.00	-664.29%	-61.50	-65.85%
Dividends paid to Company’s shareholders	-156.00	-178.50	-12.61%	-139.50	27.96%
Net cash outflow from financing activities	-34.00	-195.50	-82.61%	-198.20	-1.36%
Net (decrease)/increase in cash and cash equivalents	36.10	-11.80	-405.93%	1.40	-942.86%
Effects of exchange rate changes on cash and cash equivalents	21.50	33.30	-35.44%	31.90	4.39%
Cash and cash equivalents at end of period	57.60	21.50	167.91%	33.30	-35.44%
Boral Limited
Particulars	2017 ($’m)	2016 ($’m)	2017 (%)	2015 ($’m)	2016 (%)
cash flows from operating activities
Receipts from customers	4,583.30	4,635.70	-1.13%	4,847.40	-4.37%
Payments to suppliers and employees	-4,049.20	-4,069.50	-0.50%	-4,317.50	-5.74%
Dividend received	87.90	75.90	15.81%	41.20	84.22%
Interest received	24.40	8.50	187.06%	8.80	-3.41%
borrowing costs paid	-74.40	-69.20	7.51%	-72.10	-4.02%
Income taxes paid	-41.80	-69.40	-39.77%	-45.40	52.86%
restructure, acquisition and integration cost	-116.90	-34.50	238.84%	-44.10	-21.77%
Net cash inflow from operating activities	413.30	477.50	-13.45%	418.30	14.15%
Cash flows from investing activities
Payments for property, plant, equipment	-336.40	-320.30	5.03%	-243.60	31.49%
purchase for intangibles	-3.70	-3.50	5.71%	-6.30	-44.44%
purchase of controlled entities and businesses	-3,636.50	0.00	#DIV/0!	0.00	#DIV/0!
cash acquired relating to acquisition of controlled entities	74.80	0.00	#DIV/0!	0.00	#DIV/0!
repayment of loan by associates	8.80	8.80	0.00%	0.00	#DIV/0!
proceeds on disposal of non-current assets	39.20	55.50	-29.37%	45.00	23.33%
proceeds on disposal of controlled entities and associates	122.50	0.00	#DIV/0!	149.20	-100.00%
Net cash used in investing activities	-3,731.30	-259.50	1337.88%	-55.70	365.89%
Cash flows from financing activities
capital raising	2,018.90	0.00	#DIV/0!	0.00	#DIV/0!
on-market share buy back	0.00	-115.40	-100.00%	-116.00	-0.52%
dividends paid	-226.20	-154.20	46.69%	-129.10	19.44%
Proceeds from borrowings	1,803.60	2.20	81882%	245.20	-99.10%
repayment of borrowings	-489.30	-6.00	8055%	-251.70	-97.62%
Net cash outflow from financing activities	3,107.00	-273.40	-1236.43%	-251.60	8.66%
Net (decrease)/increase in cash and cash equivalents	-211.00	-55.40	280.87%	111.00	-149.91%
Cash and cash equivalents at beginning of period	452.10	505.80		383.20
Effects of exchange rate changes on cash and cash equivalents	-3.30	1.70	-294.12%	11.60	-85.34%
Cash and cash equivalents at end of period	237.80	452.10	-47.40%	505.80	-10.62%

(Adelaide Brighton Limited, 2017; 2016); (Boral Limited, 2017; 2016).

Adelaide Brighton limited: As per the above comparative analysis, it can be said that receipts from customers is increased by 8.15% in 2017 whereas in 2016 it was increased by 0.63% Similarly, cash paid to suppliers and employees are also increased by 11.32% in 2017 as compared to 2.59% in 2016. This signifies a worry situation from point of view of operating activities. In addition to this, proceeds from plant and equipment shows declining trend whereas the payments have also shown in declining trend. Further interest paid by the company is more than interest received by the company in 2017. Thus, it is inferred that company has highest amount of net cash inflows in among three years. Continuing the explanation with financing activities it depicts that company has drawn down the borrowings by $ 118 million in 2017 which shows better financial health. As a result, the company has overall cash and cash equivalents of $ 36.1 million which is highest among the three years (Adelaide Brighton limited, 2017; 2016).

Boral limited: As per the above comparative analysis, receipts from customers was declined by 1.13% in comparison to 2016 and 2015 financial years. Further, payments to suppliers and employees is also decreased by 0.5% from 2016 whereas it was decreased by 5.47% in 2016 as compare to 2015 (Boral Limited, 2017; 2016). Taking the figures of purchase of intangibles and plant, property and equipment it is observed that company has paid highest amount in 2017 in comparison to 2016 and 2015. Similarly, Proceeds from non-current assets is decreased by 29% from 2016 whereas it was increased by 23% in 2015. Continuing the explanation, the company has purchased controlled entities and businesses with an amount $ 3636.5 million. Further with financing activities it depicts that company has paid dividends higher by $ 483.6 million in 2017 as paralleled to 2016. Similarly, the company is proceeds with a borrowing amount which is higher by $ 1801 million. Also there were no capital raising in 2016 and 2015. Thus as a result, net cash increase or decrease in least among three years in 2017.  

Adelaide Brighton limited: This statement forms an integrated part of financial statements. This statement has reported profit for the period and other comprehensive income which are subdivided into items that are reclassified to profit or loss and items that are not reclassified to profit or loss. The total of above items is attributable to owners of the company and non-controlling interests. Hence in this case, company has reported $ 183.8 million in 2017 and $ 187.4 million in 2016 (Adelaide Brighton Limited, 2017; 2016).

Boral limited: This statement forms an integrated part of financial statements. This statement has reported profit for the period and other comprehensive income which are subdivided into items that are reclassified to profit or loss and items that are not reclassified to profit or loss. The total of above items is attributable to members of parent entity and non-controlling interests. Hence in this case, company has reported $ 251.7 million and $ 410.5 million in 2017 and 2016 respectively (Boral Limited, 2017; 2016).

vii.  The statement of comprehensive income encompasses net profit for the period together with all those revenues and outlays that generally evade the income account for the reason that they are yet to be recognized. For instance: Translation of foreign operations, cash flow hedge funds, gains or losses from derivatives etc. Hence, it can be said that above transactions are not regular in nature and also are not occur often and also they are not normal profit or loss for the company and therefore they are not required to report in statement of profit or loss of the company.

viii. Comparative analysis:

Adelaide Brighton Limited
Particulars	2017 ($m)	2016 ($m)	$ change	% change
Net profit	182.1	186.2	-4.1	-2%
Other comprehensive income
Items reclassified to income statement
net exchange from translation of foreign operations taken to equity	0.4	-0.9	1.3	-144%
fair value adjustment on cash flow hedges	0	1.3	-1.3	-100%
Income tax relating to these items	0	-0.4
Items not reclassified to income statement
Actuarial gain on retirement benefit obligation	1.9	1.7
Income tax relating to these items	-0.6	-0.5	-0.1	20%
Total comprehensive income	183.8	187.4	-3.6	-2%

(Adelaide Brighton Limited. 2017; 2016).

Boral Limited
Particulars	2017 ($m)	2016 ($m)	$ change	% change
Net profit	296.9	256	40.9	16%
Other comprehensive income
Items reclassified to income statement
net exchange from translation of foreign operations taken to equity	-123.9	-7	-116.9	1670%
fair value adjustment on cash flow hedges	2.6	-7.7	10.3	-134%
income tax on items that may be reclassified subsequently to income statement	-1.3	10.4	-11.7	-113%
Total comprehensive income	174.3	251.7	-77.4	-31%

(Boral Limited, 2017; 2016).

To reflect the true and fair view about the company’s financial stability and performance then the above items of comprehensive income should not form the part of statement of income. As these items are not in regular nature and so they do not form part of ordinary profit earned by the company. Further these items have no monetary effect and therefore to present the shareholders the true picture about the company’s performance in order to encourage them for the investment these are not included in income statement.

1.  Items of other comprehensive income should become the part of evaluation of manager’s performance because they are ultimate responsible about the company financial stability and the performance.

1. Tax expense:

Particulars	2017 ($m)	2016 ($m)
Adelaide Brighton Limited	$ 72.3	$ 68.4
Boral Limited	$ 51.4	$ 35.6

(Adelaide Brighton Limited, 2017; 2016); (Boral Limited, 2017; 2016).

1. Effective tax rate:

Formula:

Effective tax rate = [Income tax expense/ Profit before tax] *100

Adelaide Brighton Limited

Particulars	2017 ($m)	2016 ($m)
Income tax expense	$72.3	$ 68.4
Profit before tax	$ 254.4	$ 254.6
Effective Tax Rate	28.42%	26.87%

(Adelaide Brighton Limited, 2017; 2016).

Boral Limited

Particulars	2017 ($m)	2016 ($m)
Income tax expense	$ 51.4	$ 35.6
Profit before tax	$ 301	$ 281.1
Effective Tax Rate	17.08%	12.67%

(Boral, 2017; 2016).

Adelaide Brighton Limited has higher effective tax rate.

xii. For the purpose of reducing the computable revenue of the entity, deferred tax assets are recorded in the statement of financial position. The reason of recording deferred tax assets is at the time when the company has over funded the tax amount and the additional sum will return to the company in form of tax relief. In addition to this, when there is a difference in accounting rules and tax rules then deferred tax asset is reported. Likewise, Deferred tax liability is totally opposing to deferred tax assets wherein entity would require to pay taxes as per accounting rules but have delayed to the future. In other words, when the company has under paid the amount of tax then deferred tax liabilities are created. Hence according to this case, Adelaide Brighton limited has recognised Deferred tax liabilities of worth $ 86 million in financial year 2017 (Adelaide Brighton limited, 2017; 2016) whereas Boral limited has recorded deferred tax assets of worth $ 128.4 million in Financial Year 2017 (Boral Limited, 2017; 2016).

xiii. Deferred tax assets/deferred tax liabilities:

Adelaide Brighton limited has stated Deferred tax liabilities of worth $ 86 million and $ 89.9 million in financial year 2017 and 2016 respectively. This signifies that the Deferred tax liabilities is decreased by $ 3.9 million in year 2017 in comparison to year 2016 (Adelaide Brighton limited, 2017; 2016).

Boral limited has stated Deferred tax assets of worth $ 128.4 million and $ 234.7 million in financial year 2017 and 2016. This signifies that the Deferred tax assets are decreased in year 2017 in comparison to year 2016 by $ 106.3 million (Boral Limited, 2017; 2016).

xiv. Cash tax amount:

Adelaide Brighton limited

Particulars	2017 ($m)	2016 ($m)
Current Income tax expense	$ 71.8	$ 69.9
Unlevered income taxes	$ 1.8	-$ 8.3
Cash tax amount	$ 73.6	$ 61.6

(Adelaide Brighton Limited, 2017; 2016).

Boral limited

Particulars	2017 ($m)	2016 ($m)
Current Income tax expense	$ 76.2	$ 15.5
Unlevered income taxes	-$ 46	$ 33.1
Cash tax amount	$ 30.2	$ 48.6

(Boral, 2017; 2016).

Formula: Cash tax rate = [Cash tax expense/ profit before tax] *100

Adelaide Brighton Limited

Particulars	2017 ($m)	2016 ($m)
Cash tax amount	$ 73.6	$ 61.6
Profit before tax	$ 254.4	$ 254.6
Cash Tax Rate	28.93%	24.19%

(Adelaide Brighton Limited, 2017; 2016).

Boral Limited

Particulars	2017 ($m)	2016 ($m)
Cash tax amount	$ 30.2	$ 48.6
Profit before tax	$ 301	$ 281.1
Cash Tax Rate	10.03%	17.29%

(Boral, 2017; 2016).

Adelaide Brighton Limited has higher cash tax rate.

xvi. The cash tax rate is calculated under the law of taxation and it is paid to the government establishments whereas Book tax rate is calculated as per the policies of generally accepted accounting principles and presented in the financial statements of the company.

Conclusion

It is concluded that performance of Adelaide Brighton limited and Boral limited is evaluated from various categories such as on basis of owners’ equity, cash flow statement, other comprehensive income and corporate tax rate. According to comparative analysis of both companies it can be concluded that Adelaide Brighton limited and Boral limited has sound financial stability.

References

Adelaide Brighton Limited, 2018, About us, viewed on 28 September 2018 from https://www.adelaidebrighton.com.au/about-us.

Adelaide Brighton Limited, 2018, investor Centre, viewed on 28 September 2018 from https://adbri.com.au/investors#reports-2017.

Adelaide Brighton Limited, 2017, Annual Report, viewed on 28 September 2018 from

https://adbri.com.au/-/adbri/lib/pdfs/2016/reports/AR%202017%20-%20Annual%20Report%20complete.pdf.

Adelaide Brighton Limited, 2016, Annual Report 2016, viewed on 28 September 2018 from https://adbri.com.au/-/adbri/lib/pdfs/2016/asx%20announcements/ABL%202016%20AR%20-%20mid%20res%20version%20FINAL.pdf

ASX, 2018, ABC, viewed on 28 September 2018 from https://www.asx.com.au/asx/share-price-research/company/ABC.

ASX, 2018, BLD, viewed on 28 September 2018 from https://www.asx.com.au/asx/share-price-research/company/BLD.

Boral, 2017, Boral Annual report 2017, viewed on 28 September 2018 from https://www.boral.com/sites/corporate/files/media/field_document/Boral-Annual-Report-2017.pdf.

Boral, 2016, Boral Annual report 2016, viewed on 28 September 2018 from https://www.boral.com/sites/corporate/files/media/field_document/Boral-Annual-Report-2016.pdf.